Sink or Swim: Governments Must Embrace Blockchain Technology

The reaction of different governments to blockchain as technology and cryptocurrency, in particular, vary significantly. While some embrace the technology and have given the industry a boost through supportive policies and frameworks, others, such as China, have chosen to be overly restrictive, issuing stringent warnings on Initial Coin Offerings (ICOs), development, and trading in cryptocurrencies. In China, a ban on ICOs has been effective since September 2017.

On the other hand, in Hong Kong, a stone’s throw away from China, the government is proactively engaging its citizens through media campaigns aimed at providing a “correct and comprehensive understanding of ICOs and cryptocurrencies,” according to Hong Kong’s Financial Services and Treasury Bureau (FSTB), and Investor Education Center (IEC). This is just one example of the many examples of how governments are warming up to blockchain and cryptocurrency.

What Other Measures Are Governments Taking to Harness the Potential of This Technology?

Government-Private Partnerships

In one of their premier partnerships projects, the government of Dubai has joined forces with computer giant IBM and CosenSys, a blockchain software company, to build a blockchain-based ID verification system that aims at reducing the time taken to register businesses. The system will also be used to digitize and track citizens' health records, wills, contracts and other essential information. Such a partnership serves as an acknowledgment by the government that blockchain is a technology for modern society and for the future. In fact, Dubai aims at making certain sectors of its government-run entirely on blockchain technology by the year 2020.

Additionally, in the last quarter of 2017, the government of Australia announced a grant of AUD 8 million (approx. USD 6 million) for a blockchain-powered smart utilities project. Part of the funding is to be provided by project partners such as Power Ledger, a blockchain firm. The project is meant to explore ways in which cities can utilize blockchain and data analytics for improved power distributed energy and water systems. Partners in the project include Curtin University, Murdoch University, Cisco among others.

Fully-fledged Government-based Blockchain Projects

Quite encouragingly, several governments have demonstrated the goodwill to support and use blockchain to provide services to their citizens. Sweden is one such nation, as the government is testing the possibility of running its land registry solely on the blockchain. The Lantmäteriet, the authority tasked with this project, is headed by Mats Snäll, who expressed that the aim is to reduce the bureaucratic processes characterized by a lot of paperwork and instead use blockchain technology to make processes more efficient.

Elsewhere, the Estonian government became the first in the world, and plans are now at an advanced stage to introduce the Estcoin, a national digital currency that will mainly be used on community, identity, and currency. This small northern European nation has a population of around 1.3 million people and is rather advanced in its approach to technology. The country has a well established digital system known as e-Residency, where nonresidents are able to obtain ID cards, obtain government services and make secure transactions. E-Residency is the platform that has motivated the introduction of Estcoin. Estonia’s general cryptocurrency ecosystem dates way back to 2008.

Government Embracing Cryptocurrency Through Regulation

Perhaps the biggest discussion in the blockchain market right now is the role of government as a regulator and enabler of the blockchain technology. By now, virtually all governments in the world have issued statements ranging from the outright rebuke of cryptocurrencies to motivating support.

The Securities Exchange Commission (SEC), the US stock market regulatory body, is known to issue regular statements on the state of cryptocurrencies. Recently, the commission said that it would be filtering companies issuing ICOs as a way of protecting the general public.

Authorities in the Czech Republic, one of the most adoptive countries of cryptocurrencies in Europe, sent a statement to banks encouraging them to adopt bitcoin in their trading. The Czech National Bank termed Prague, the capital city, the “home of cryptocurrency users.” The bank, in a statement, forecasts a situation where conventional currency would be replaced “with a fixed money alternative.”

The Inevitable Truth

The inescapable truth is that governments must streamline their systems to enable the blockchain industry to thrive. Several governments have set up independent bodies to look at how best the technology can be utilized for the benefits of their citizens. The fact that blockchain products are mushrooming at supersonic rates all over the world highlights the need for governments to put in mechanisms to guide the industry. Importantly, governments will have to choose what works well within their specific regions, and customize their regulations accordingly while harmonizing them with global trends.

The original Data Driven Investor article is here. The views and opinions expressed in this article are those of the author and do not necessarily reflect those of CDOTrends.